Most people in Orange County who could buy a home this year will not. In my experience it usually has nothing to do with their finances. It has to do with something they read.
They read that they need a huge down payment. They read that they need a certain credit score. They measure themselves against a number they found online, decide the answer is no, and stop looking. Nobody ever opens their file.
So this is what I would want a first-time home buyer in Santa Ana, Anaheim, Irvine, Costa Mesa or anywhere else in Orange County to read before deciding they are not ready.
The twenty percent myth
You do not need twenty percent down to buy a home.
You have probably heard that and not believed it, so let me explain where the myth comes from. Twenty percent is the point at which private mortgage insurance can usually come off a conventional loan. It is not a requirement to get one. Those are two completely different things, and confusing them is the most expensive misunderstanding in this business.
There are several loan types built for buyers who do not have a large amount saved. FHA loans exist for exactly that reason. Conventional loans include first-time buyer options with reduced down payment requirements. VA loans are available to eligible service members, veterans and surviving spouses. USDA loans exist for eligible rural areas, though very little of Orange County qualifies.
What any of them would require from you depends on the loan program, your credit profile, the property, and the lender. That is not me dodging the question. It is the honest answer, and anyone who hands you a single number without looking at your situation is guessing.
Two things worth knowing. A down payment can often come from a gift, provided it is documented properly. And the down payment is not the only cash involved. Closing costs and reserves are what surprise people at the end.
There is no single credit score that decides this
This is where I lose the most people, and it is the part that frustrates me most.
Someone reads a threshold on a website, checks their own score, sees they are underneath it, and concludes they cannot buy a home. What they do not know is that credit requirements vary by loan program and by lender, and that some options reach further down than the internet suggests. Two people with identical scores can get very different answers depending on what else is in their file.
Your score is also not permanent. It is common to see someone move up meaningfully in a matter of months by fixing something small, like a card sitting close to its limit or an error on a report that nobody ever caught. If you are months away from buying rather than weeks, that work is often worth more than the same effort spent saving.
The only way to find out where you actually stand is to have someone look at it. Deciding you do not qualify based on an article is how people lose years.
Down payment assistance exists, and the rules keep moving
California runs several programs designed to help first-time buyers with a down payment or closing costs, administered through the California Housing Finance Agency. Some are structured as a second loan with no monthly payment. Some are aimed at particular groups of buyers. Some are open continuously and others are not.
I am deliberately not going to list terms and eligibility rules here, because they change, and a page that quotes them is out of date the moment they do. Half the articles you will find on this subject describe programs as they existed a while ago, which is worse than saying nothing.
Which of them could apply to you is a conversation, not an article.
What actually makes an offer competitive here
Orange County is not a market where you can start looking at houses and sort out the money afterwards. Sellers and their agents look at the strength of the financing behind an offer, not just the price on the front of it.
A serious pre-approval means someone has reviewed your income, your assets and your credit, and is prepared to stand behind the outcome. An online estimate that took ninety seconds is not the same thing, and experienced listing agents can tell the difference immediately.
Getting that done before you fall in love with a house is the single biggest advantage available to a first-time buyer in this county, and it costs nothing.
Three things I see first-time buyers get wrong
- Shopping for a house before shopping for the loan. Sort the financing first and you negotiate from a completely different position.
- Assuming assistance programs are a formality. Several require homebuyer education before you can use them, and that takes time. Start it early rather than after an offer is accepted.
- Treating a mortgage as a bill instead of an instrument. For most people this is the largest financial position they will ever hold. How it is structured compounds for decades.
Start with the guide
I wrote The First-Time Homebuyer's Adventure for exactly this situation. It walks through what to do before you start shopping, what lenders actually look at, and the costs nobody warns you about until closing. It is free, it arrives the moment you enter your email, and taking it does not sign you up for anything.
Download the free First-Time Homebuyer's Adventure guide.
If you would rather just ask someone, that works too. Book a free consultation and we will look at your actual situation instead of a general one. If the honest answer is that you should wait, I will tell you that.
Frequently asked questions
Do I need a large down payment to buy in Orange County?
Not necessarily. Several loan programs are designed for buyers without a large amount saved, and the twenty percent figure people repeat relates to removing mortgage insurance on a conventional loan rather than to qualifying for one. What you would need depends on the program, your credit profile, the property and the lender.
What credit score do I need to buy a home in California?
There is no single answer. Requirements vary by loan program and by lender, and some options reach further down than most people expect. Two buyers with the same score can receive different answers depending on the rest of their file. The only reliable way to find out is to have your situation reviewed.
What counts as a first-time home buyer?
It usually does not mean you have never owned a home. Most programs define it in terms of not having owned and occupied a principal residence for a set period beforehand, so people who owned a home years ago often qualify again. It is worth checking rather than assuming.
Can someone give me the money for a down payment?
Gift funds are permitted on many loan programs, subject to documentation showing the money is a genuine gift with no repayment expected. The rules on who may give it and how it must be evidenced vary by program.
Is there down payment assistance for first-time buyers in California?
Yes, administered through the California Housing Finance Agency, though which programs are open and what they require changes over time. Check CalHFA directly for current availability, or ask us and we will tell you what applies to your situation.
Should I talk to a mortgage broker before I start looking at houses?
Yes. In a market like Orange County, an offer backed by a properly reviewed pre-approval carries far more weight than one backed by an online estimate, and knowing your position early changes which houses you look at in the first place.
Written by Victor Salazar, founder of Kings of Lending and a licensed mortgage broker, NMLS #2052157. Victor is licensed in 11 states and, through E Mortgage Capital, Inc. (NMLS #1416824), serves borrowers in 49 states. He is the author of The Wealth Builder's Mortgage Guide: Simple Steps to Financial Independence. Before lending, he was a professional BMX rider who performed with Cirque du Soleil. More about Victor.
This article is general educational information about home financing in California. It is not an offer of credit, a commitment to lend, financial advice, or a statement of the terms available to any individual. Loan programs, credit requirements, down payment requirements, interest rates and assistance program availability are set by lenders, investors and agencies, vary by borrower and property, and change without notice. Any specific figures relevant to your situation can only be determined through a complete application and verification of your information. Kings of Lending is the mortgage team of Victor Salazar at E Mortgage Capital, Inc. Equal Housing Lender.
